Characteristics & objectives of accounting

Characteristics & objectives of Accounting are the attributes of the accounting information such as tend to enhance its understandability and usefulness & useful information to the interested group of users, both external and internal.

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2. Characteristics & objectives of Accounting
January 3, 2022December 21, 2020 by
Contents

What are the main characteristics & objectives of
accounting?

Characteristics & Objective

Characteristics & objectives of Accounting are the attributes of
the accounting information such as tend to enhance its
understandability and usefulness & useful information to the

interested group of users, both external and internal.

3. Characteristics of Accounting

Qualitative characteristics of accounting are the attributes of

accounting info that tend to strengthen its comprehensibility and
utility. To assess whether accounting info is named helpful, it
should possess the characteristics of dependability, relevance,

comprehensibility, and equivalence.

Main Characteristics of Accounting
1, Reliability

Reliability ability the purchasers should be capable to believe the
knowledge. The reliability of accounting statistics is set by way of the
diploma of correspondence between what the facts convey about the
transactions or occasions that have occurred, measured, and
displayed. A piece of dependable information should be free from
error and bias and faithfully represents what it’s meant to represent.
To make certain reliability, the facts disclosed should be credible,
verifiable by way of unbiased events use the identical approach of
measuring, and be neutral and faithful.

2. Relevance

To be relevant, facts have to be accessible in time, ought to help in
prediction and feedback, and ought to affect the selections of
customers with the aid of :(a) assisting them to shape prediction

4. about the results of past, current, or future events; and/or (b)
confirming or correcting their previous evaluations.

3. Understandability

Understandability capability decision-makers ought to interpret
accounting information in an identical experience as it is organized
and conveyed to them. The qualities that distinguish between the
right and awful conversation during a message are integral to the
understandability of the message. A message is said to be
successfully communicated when it is interpreted through the
receiver of the message in the equal experience in which the sender
has sent. Accountants should present the same facts in the most
intelligible manner without sacrificing relevance and reliability.

It is not ample that the economic data is applicable and
dependable at a singular time, during a specific circumstance, or
for a singular reporting entity. But it’s equally necessary that the
purchasers of the regularly occurring motive economic reports
can evaluate a variety of things of an entity over a definite time
duration and with different entities. To be comparable,
accounting reviews need to belong to a standard duration and
use a frequent unit of size and structure of reporting.

Objective of Accounting

Asa system, the elemental goal of accounting is to grant
useful information to the fascinated crew of users, each exterior

5. and internal. The necessary information, especially in the case of
exterior users, is supplied in the shape of economic statements,
viz., income and loss account, and balance sheet. Besides these,
the administration is provided with additional information from
time to time from the accounting documents of the business.

The objective of Accounting
1. Maintenance of Records of Business Transactions

Accounting is used for the protection of a systematic document of all
financial transactions in the books of accounts. Even the foremost
notable govt or manager cannot precisely take under consideration
the several quantities of various transactions like purchases, sales,
receipts, payments, etc. that take location in business every day.

2. Calculation of Profit and Li

The proprietors of the enterprise are wanting to have a notion
about the web effects of their business operations periodically,
i.e. whether the commercial enterprise has earned profits or
incurred losses. Thus, the other goal of accounting is to verify
the profit earned or loss sustained by way of a billboard
enterprise during an accounting period, which may be
effortlessly exercised with the assist of a file of incomes and
expenses relating to the commercial enterprise by using getting
ready an income or loss account for the period. Profit represents
the extra income (income).

6. 3. Depiction of Financial Position

Accounting additionally goals at ascertaining the monetary role
of the business within the structure of its property and liabilities
at the cease of every accounting period. A suited report of
sources owned using the enterprise company (Assets)and claims
towards such sources (Liabilities) allows the practice of a press
release recognized as a stability sheet role statement.

4. Providing Accounting Information to its Users

The accounting statistics generated by using the accounting
procedure is communicated within the structure of reports,
statements, graphs, and charts to the users who want it in
distinctive choice situations. As already stated, there are two
primary person groups, viz. interior users, more often than not
management, who need timely statistics on the worth of sales,
profitability, etc. for planning, controlling and decision-making
and exterior customers who have restricted authority, ability, and
assets to acquire the imperative data and have to be counted on
financial statements (Balance Sheet, Profit, and Loss account).

Primarily, external users are involved in the following

+ Investors and attainable investors-information on the dangers and
return on investment.

+ Unions and worker groups-information on the stability,
profitability, and distribution of wealth inside the business;
Lenders and monetary institutions-information on the
creditworthiness of the organization and its capability to repay
loans and pay interest.

7. Suppliers and creditors-information on whether quantities owed
will be repaid when due and on the endured existence of the
business.

Customers-information on the persevered existence of the
commercial enterprise and thus the likelihood of a persisted
provide of products, components, and after-sales service.
Government and different regulators-records on the allocation of
resources and the compliance to regulations.

Social duty groups, such as environmental groups-information on
the influence on the surroundings and its protection.
Competitors-information on the relative strengths and
weaknesses of their competition and for comparative and
benchmarking purposes. Whereas the above classes of users
share in the wealth of the company.

Competitors require statistics in general for strategic purposes.

Youthpreneur — Day One or One Day

Accounting is a feature of managing the finances of any organization in
the right place and correcting the financial condition. Which makes any
organization more reliable in understandings. Accounting is aimed toward
properly posing for business transactions, profit and loss, financial
position, and accounting statistics of any organization.

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